Germany's top court to rule on euro bailouts September 7

By IBT Staff Reporter On 08/23/11 AT 11:56 AM

Germany's top court will give its verdict early next month on whether the government broke the law with last year's bailouts of debt-stricken euro zone countries -- a ruling which could limit Berlin's room to manage the region's debt crisis.

The Karlsruhe-based Federal Constitutional Court will announce its verdict on September 7 at 4 a.m. EDT, it said in a statement on Tuesday.

The court is considering three lawsuits brought by six eurosceptic plaintiffs -- five academics and a lawmaker from the Bavarian sister party to Chancellor Angela Merkel's Christian Democrats -- against German-backed international bailout schemes for Greece, Ireland and Portugal.

The plaintiffs argue that the bailouts, which total 273 billion euros ($393 billion), violate property rights and other protections in the German and European constitutions, and break the no-bailout clause in the European Union's treaty, which says neither the EU nor member states should take on other governments' liabilities.

NOT EXPECTED TO BLOCK BAILOUTS

Legal experts believe the court is extremely unlikely to block Germany's participation in the multi-year bailouts, or in an additional 109 billion euro package of official aid for Greece that euro zone leaders announced last month.

Five of the plaintiffs tried unsuccessfully in the 1990s to have the constitutional court prevent the introduction of the euro currency.

The German government insists it has not broken any laws, which Finance Minister Wolfgang Schaeuble reiterated on Saturday.

I am confident that the constitutional court's decision will confirm again that we violated neither the European treaties nor the (German) constitution, he said.

However, many legal experts and some government sources say they expect the court to set conditions for German participation in future bailouts, perhaps giving the German parliament a bigger say in approving it. That makes the court's verdict key for the whole euro zone.

For example, the eight judges could require German contributions to the European Stability Mechanism, the planned regional bailout fund which will start operating in 2013, to be subject to a vote by Germany's parliament. Currently, this is not formally mandated.

During a court hearing on July 5, plaintiffs argued that the lower house of Germany's parliament had been politically blackmailed into quick approval of aid for Greece last year.

The pending court case has given Merkel a strong reason for taking a hard line in the euro zone crisis; she has argued, partly on the grounds that Karlsruhe might not approve, against ideas such as joint issuance of bonds by euro zone countries. Some say the case has been a useful negotiating tool for her.

Germany is the bloc's biggest economy and foots more than a quarter of the euro zone's bill for bailouts. But as further aid schemes are drawn up and as the German economy seems to be slowing, more Germans are fed up with financing rescues.

German Labour Minister Ursula von der Leyen, who is also deputy leader of Merkel's Christian Democrats, on Tuesday backed calls to demand collateral for national contributions to euro zone bailouts, reflecting discord within the cabinet over Merkel's leadership in the euro zone crisis.

Von der Leyen's comments did not reflect the government's view, a government source said.

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